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Global Tax News

Nomination for Network of the Year award

Russell Bedford International is one of only three finalists in the ‘Network of the Year’ category at this year’s Digital Accountancy Awards. Russell Bedford CEO Stephen Hamlet said: « It is an absolute honour to be listed as one of just three international organisations in this category and to be nominated among such esteemed networks. » The awards ceremony will be held on Thursday, 4th October 2018 at the Waldorf Hilton, in London’s West End.

Russell Bedford International has released the September 2018 edition of its biannual Business World magazine, featuring views and analysis from specialists within the Russell Bedford network and also guest authors from other organisations around the world.

Russell Bedford announces the addition of two new member firms, M M Rahman & Co. in Bangladesh and KDLT in St. Vincent. Russell Bedford CEO Stephen Hamlet said: “It is a pleasure to welcome M M Rahman & Co. and KDLT to Russell Bedford. I am delighted to see the network continue to expand into more and more previously unrepresented regions and consistently enhancing the services offered.”

NORTH AMERICA

‘Tax Reform 2.0’ to lock in tax cuts past 2025

House Republicans are looking to extend tax cuts that are scheduled to expire in 2025, to bolster investor confidence as well as to highlight the economic growth seen since the introduction of the Tax Cuts and Jobs Act. The legislation had expiration dates on a number of individual tax provisions, including the lower rates, expanded estate-tax exemption, larger standard deduction, expanded child tax credit, and 20% pass-through deduction. The Republicans have now outlined “Tax Reform 2.0” measures to make them permanent, in the hope of moving them through the House Ways and Means Committee for a full House vote by the end of the month. “We just want to give people certainty that we want to extend the individual tax cuts,” said Rep. Tom Rice (R-SC), adding “The longer it goes, the harder it can get. We want to do it while we have the majority, certainly, and do whatever we can to get it across the finish line.”

President Trump has suggested that Apple could face no taxes if the company moves its manufacturing operations to the US from China. In a tweet, he said: “Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now.” The tweet appears to be in response to a letter sent by Apple to the US Trade Representative in which the company warned that many Apple products could increase in price if Mr Trump implements a proposed round of tariffs on $200bn worth of Chinese goods.

The US Chamber of Commerce wants the Treasury Department to give corporations that overpaid taxes on offshore profits greater flexibility in deciding how they use the refunds. Since the passage of the Tax Cuts and Jobs Act in December, companies have started making payments on an estimated $3.1tn in profits stockpiled overseas since 1986, payments that can be made over eight years. A two-tiered levy system is in operation, with a 15.5% rate for cash and 8% on non-cash or illiquid assets. The IRS says that it won’t rebate excess payments or credit them toward tax bills not tied to repatriation, such as annual bills for corporate income. The Chamber says: “This guidance places taxpayers who are in an overpayment position at a competitive disadvantage to taxpayers who are in an underpayment position.”

Bloomberg

NFL kick-off boosts coffers in states with legal sports betting

The NFL season has kicked off – and, for the first time, millions of fans will be able to bet on the sport legally. The Supreme Court’s May ruling in Murphy v. NCAA repealed the federal Professional and Amateur Sports Protection Act of 1992, with Delaware, New Jersey, Nevada, Mississippi and West Virginia quick to legalise sports betting, with more to follow. Sara Slane, senior vice president of public affairs at the American Gaming Association, said that states with weak or low tax revenue figures are likely to be the next, with Indiana and Ohio the favourites to legislate for it. Additionally Richard Auxier, a research associate at the Urban-Brookings Tax Policy Center, said states neighbouring those to have legalised betting will follow suit.

Bloomberg BNA

Treasury moves to block state workarounds on tax caps

The Treasury and IRS have issued new rules that will block states’ attempts to circumvent the new $10,000 cap on state and local tax (SALT) deductions. High-tax states such as New York, New Jersey, Connecticut and California have either created, or are working on, workarounds to the $10,000 limit on the SALT deduction – including permitting municipalities to set up charitable funds and allow taxpayers to contribute to them in exchange for state or local tax credits, allowing them to deduct from their income for federal tax purposes.

San Antonio lawyer Elizabeth Copeland has been appointed a judge on the US Tax Court in Washington, D.C. – the first Tax Court judge to be nominated by two presidents from two different political parties. Her nomination to the court last summer by President Trump came two years after her name was put forward by President Obama, a nomination which lapsed without a vote. The Tax Court is comprised of 19 judges who are appointed to 15-year terms; Ms Copeland, a specialist in employment tax disputes, tax collection matters, and IRS appeals expects to begin her term either late this month or early October.

France’s finance minister has signalled that support is growing for a European Union plan to tax the revenue of large technology companies. At a meeting of EU finance ministers in Vienna, Bruno Le Maire suggested adding a “sunset’’ clause that would allow the European Commission’s planned revenue tax to be automatically phased out once a global scheme is ready. “Lots of countries have changed their position,” said Le Maire, highlighting what he called “constructive” statements from the UK, the Netherlands and Luxembourg. He added that the US should not see the proposed levy on the internet giants as an attack against America.

Bloomberg

IPPR wants tax reform to combat wealth inequality in UK

The Archbishop of Canterbury has called for an increase in the minimum wage and an overhaul of the tax system to help close a widening gap between the rich and the poor in the UK. Justin Welby’s demands come in a report from the IPPR Commission on Economic Justice, which was co-written by the Archbishop and sets out a 10-year plan to get the economy working better for everyone. The report calls for all types of income to be taxed equally – hitting those earning from capital harder, and for IHT to be scrapped and replaced with a tax on all gifts over a lifetime threshold of £125,000. The proceeds would go towards a Citizens Wealth Fund which would hand out £10k to 25-year-olds to spend on housing or starting a business.

The Times reports that multinationals are paying hundreds of millions in extra tax bills to avoid the embarrassment and reputational damage of being seen as paying the diverted profits tax. The paper cites the case of Diageo, which agreed in July to pay an extra £190m in conventional corporation tax in order for HMRC to return £107m it had paid previously in DPT. The new regime was introduced to combat the loss of revenue when international companies booked high profits in low-tax jurisdictions and lower profits or losses in Britain to reduce their overall tax bills and it is set at a higher rate than corporation tax. HMRC has rapidly increased its issuance of DPT notices. Andy Wood, a director of Enterprise Tax Consultants, said: « The size of the amount paid up in the Diageo case perhaps shows the premium companies place on their good names and how far they will go to avoid the stigma of the Google Tax.”

Switzerland’s Zürcher Kantonalbank (ZKB) has agreed to pay the US Department of Justice SFr97.7m ($98.5m) to settle an investigation into its role in tax evasion by wealthy Americans using undeclared Swiss bank accounts. Reuters reported that in a court hearing in Manhattan, a US prosecutor confirmed that ZKB had agreed to pay the fine and said charges against the bank would not be pursued under the Deferred Prosecution Agreement. Two ZKB bankers, Stephan Fellmann and Christof Reist, have plead guilty to a single misdemeanour conspiracy charge, carrying a maximum prison sentence of one year. Meanwhile, the Justice Department has announced that Swiss bank Basler Kantonalbank has agreed to pay $60.4m in penalties, as part of a deferred prosecution agreement on tax evasion. The bank has admitted to conspiring to defraud the US, filing false federal tax returns from 2002 to 2012. Just over $17m will be paid to the IRS.

Tax breaks introduced by Emmanuel Macron, and a stronger economy, have lured the world’s ultra-rich to the French capital, with Paris now ahead of London for the first time as a top destination for the super-rich. Britain is now in sixth place and France fifth in the city stakes. New York lost its top spot to Hong Kong, while Tokyo came third and Los Angeles fourth. Etienne Lefevbre, editor of financial daily Les Echos, said the French president has “effectively halved the tax paid by the very wealthy” while Corinne Dadi, a tax lawyer with Stehlin, said for the first time in 15 years she was organising returns to Paris. Ms Dadi said those wishing to leave London cited “Brexit plus a huge fear of Jeremy Corbyn” and Britain’s decision to slash “non-dom” tax perks.

Specialist contractors in Ireland, including independent engineers, project managers and tech professionals, say they are ‘more likely to work abroad’ unless a tax anomaly is addressed. They are not allowed travel and subsistence expenses for tax purposes – but employees in comparable roles can reclaim the costs tax free. Jimmy Sheehan, commercial director at Contracting PLUS, said that these independent professionals (iPros) are at a disadvantage under current rules. « An employee receives these expenses tax-free, public servants and public representatives receive these expenses tax-free. But bono fide expenses incurred by iPros in relation to travel and subsistence which are wholly and necessary for business purposes, are being disallowed, » he said.

The Independent.ie

HMRC reluctant to prosecute the rich

HMRC has admitted that it allows the most powerful members of society to escape prosecution for financial crimes. Richard Las, the deputy director of HMRC in charge of organised crime, told an economic crime conference in Cambridge that the UK tax authorities accommodated celebrities’ concerns and settled debts privately to avoid the embarrassment of a public trial. He admitted that « criminal justice » was never a « default option » for HMRC. « We use it where it is necessary and it will have the greatest effect », he said. Prem Sikka, professor of accounting at Sheffield University, said: « This shows just how far removed the senior leadership of HMRC are from public opinion. This policy provides absolutely no deterrent to tax cheats. » Meanwhile, The Times reports that unexplained wealth orders have been used against suspected crime lords and corrupt oligarchs just three times in the six months since they were introduced. The UK’s National Crime Agency implemented all three orders. HMRC, the Serious Fraud Office, the Financial Conduct Authority and the Crown Prosecution Service have so far not deployed the seizure powers.

The Danish tax authority (SKAT) is targeting a number of entities in the UK as it seeks to recover a total of 12.7bn kroner ($2bn) in one of Denmark’s biggest tax fraud cases. SKAT reportedly filed 71 lawsuits at the High Court in London in July against individuals and corporate entities alleging that pension plans and investment funds received tax refunds from the Danish government to which they weren’t entitled. The tax authority is now looking to force Barclays and NatWestto reveal information regarding customers who are believed to be involved in the case, according to Copenhagen Post. “These suits underline that this alleged swindle has been mostly organised by operators using London as their base,” Thomas Svaneborg, a business journalist, told DR Nyheder.

Manchester United boss Jose Mourinho has accepted a one-year prison sentence from Spanish prosecutors in relation to a €3.3m (£3m) tax fraud. Though he won’t actually serve time, in line with Spanish rules for first time offenders, he has been fined €1.98m (£1.78m) over charges relating to income for image rights in 2011 and 2012 which were claimed to have been funnelled through a British Virgin Islands company, Koper Services, and Irish and Swiss companies, before ending up in the New Zealand-based Kaitaia Trust – which had Mourinho’s wife and children as named beneficiaries.

A Russian government minister has said the time is « inappropriate » to introduce a windfall tax on metals, mining and chemical companies. Kremlin aide Andrei Belousov had previously proposed to President Vladimir Putin to raise 500bn roubles ($7.5bn) a year with such a levy, to generate extra budget revenue to meet the economic goals set out by Mr Putin earlier this year.

Reuters

Tax sweetener could tempt Britons to Italy

The Italian government is considering a proposal to lure pensioners to poorer and depopulated areas of southern Italy with the offer of a ten-year tax holiday. The idea would initially apply to Calabria, Sicily and Sardinia, which offer few economic opportunities for their dwindling inhabitants.

Israel’s Bank Mizrahi-Tefahot has suspended its second-quarter dividend, setting aside an extra $116.5m as it begins settlement negotiations in a years-long tax evasion probe. Israel’s third-largest bank rejected a settlement offer from the US Department of Justice earlier this month, arguing that the $342m penalty did not represent a “reasonable calculation” of its liabilities.

Pakistan’s new prime minister Imran Khan has appealed to the country’s elite to pay more taxes. Less than 1% of the population files income tax. In his inaugural speech, he said: “It is your responsibility to pay taxes. Think of this as a jihad, that you need to pay tax for the betterment of your country.” He has appointed veteran government administrator Muhammad Jahanzeb Khan as the new chairman of the Federal Board of Revenue (FBR) and tasked him with improving revenue collection.

Nine of China’s top television and film production and distribution companies have agreed to cap wage payments for performers at $7.25m per season, as an investigation continues into allegations of tax evasion by some of the country’s highest paid celebrities.

South China Morning Post

Tax proposals hit investor sentiment in Sri Lanka

Sri Lankan shares suffered at the end of August as worries about tax proposals weighed on investor sentiment. Banking and telecom stocks were hit following a media report that the government planned to impose new levies on those sectors to boost revenue, analysts said.

Reuters

LATIN AMERICA

Argentina plans to alter export taxes

Argentina has proposed to alter the taxes charged on some commodities exports as the government seeks to bolster investor confidence after a plunge in the value of the peso. « The national government has adopted the decision to proceed to modify some of the export rights of grains, oilseeds and their by-products, » an official resolution stated, not saying whether the taxes would be raised or expanded.

Reuters

GLOBAL

The power of offshore wealth

The Guardian and the Times both review Moneyland: Why Thieves & Crooks Now Rule the World and How to Take It Back by Oliver Bullough. The Times’James Bloodworth describes the book as “an unflinching account of the power of offshore wealth” that is both gripping and dispiriting.